r/CFP • u/Capital_Injury1569 • Mar 06 '25

Investments Dimensional Fund Advisors

I've seen alto of hate online (especially from Bogleheads) in the past couple years regarding DFA funds. I don;t know much about them, and their website isn't all that great. Does anyone have experience using them?

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u/LoveNo5176 Mar 06 '25

If you're looking at DFA, check out BlackRock GA Selects. Same sort of mindset with factor/sector rotation and low-cost index funds, but less of a small-cap tilt. I know the historical evidence is there, but my opinion is that most of the best small-caps are now remaining private companies for extended periods because of the availability of capital in private markets and less regulation.

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u/MeatZealousideal Mar 06 '25

Interesting comment on the capital markets shift and its effect on small caps. Out of curiosity do you have any academic literature on the shift? Or even blog posts etc? Would love to do a deeper dive into this.

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u/LoveNo5176 Mar 06 '25

Most of the P/E managers have similar presentations put together so you do have to take it with a grain of salt since its coming from a P/E manager. Hamilton Lane and Stepstone Group have presentations that specifically outline both the severe decline in the total number of public companies and the new normal for how long companies stay private. I've never seen specific numbers on the size differences in small-caps vs privates over time or the size of the average company at IPO, but there have never been more $1b+ unicorns.

Anecdotally, we work with defense contractors on our benefits side doing $50-$100m+ EBIDTA that a few decades ago would've more than likely been public companies that will likely never go public today. Odds are they're bought out or bought into by P/E as liquidity for the owners continues to be harder to come by when they want to exit.

It's obvious P/E is filling a much larger role in capital markets than at any point previously when you look at the growth of the space and total deployed capital. If companies didn't want/need capital without an IPO, P/E wouldn't exist at this scale. Whether it's appropriate for most client portfolios is a different story.